Professional Documents
Culture Documents
Trends in Global Transportation Pricing Vs OTM Advanced PDF
Trends in Global Transportation Pricing Vs OTM Advanced PDF
Vs
OTM Advanced Pricing Configurations
Ashok Revuri
Ashok Mishra
Mahindra Satyam
© Mahindra Satyam 2012
Agenda
Significance of Pricing in Transportation
Pricing Strategies
Q&A
Providers Shipper
Tug of war : Carriers need to make margins and shippers need to reduce the Transportation
costs. In this practice, rating becomes challenging
Service providers need to come up with innovative pricing structures to sustain in the
Transportation market
© Mahindra Satyam 2012 3
Pricing Strategies
Cost-of-service strategy : Carrier estimates cost of providing service then adds on a percent
profit margin. Commonly used for pricing transport of low value goods or in highly competitive
situations
Value-of-service strategy: price is based on value as perceived by the shipper rather than the
carrier. Commonly used when services are sold in niche markets
Combination pricing strategy: price is set at a value between cost-of-service minimum and
value-of-service maximum. Most common pricing strategy
Net-rate pricing strategy : is a simplified pricing format, Established discounts and accessorial
charges are rolled into one all-inclusive price tailored for individual customer needs
Pricing Strategies
ental
Air Freight Detention/
Weight/Value/Pa Freight Per KM
Freight Per Item Chartering Demurrage
ckage/KM/AWB
Based on Hitch Freight
Percentage of (Delivery
Ocean Freight LCL & Break
Service Delivery Value of Goods Charges Bulk
Location)
Basic Charges Dedicated Ocean Freight
Cargoes stored
Freight Product
on Deck &
Type /Shared Fleet Surcharges Under the Deck
Special Service
Charges Freight Per city Origin
Volume Container type
group Accessorial
Outside Delivery
Charges
Charges
Base Rate Origin Customs Destination
Redelivery and
Minimum Clearance Customs
Return
Charges Accessorial charges Clearance
Agreed Upon Charges charges
Charges Prevailing
Fuel surcharge surcharges
Additional
Charges Destination
Direct/ Interline
charges
Rules Tariff
• Ocean Freight rates declined since 2006 , Carriers suffered losses and are
pushing rate increases.
• Air Freight Rates overall stable- however include significant fuel increases
• Forwarders profitability is overall under pressure- new sources of margins to be
elaborated
• Due to lower margins & price pressure, Rate structures are becoming Complex
Note: Yield is defined as profit per unit Source: HARPEX, IATA, Line haul, Annual reports, Roland Berger
© Mahindra Satyam 2012 6
Freight consolidation and Pricing – An example
SQ-Singapore Airlines to FF
SHA-LAX (ULD rate)
FF to Individual Customers
(SHA- LAX per pound rate)
Notes:
1. OTM has very flexible design for defining rates. Therefore, pricing
solutions to a given requirement can be achieved in many ways within
OTM.
2.All the pricing information mentioned in following slides does not reflect
any company’s contractual information
- Over and
above per pack /
kg / Km rate /
ship unit Configuration Elements:
-Multi cost rule- ADD
-Conditional Parameters-
Example shpt weight
Basic charge of $10.00 for -Rate basis – Shpt total
up to 5 kg weight
-Marginal costing
A shipment of 8 kg would
price as $10.60 which
includes $10 for the first 5
kg, and then 3*20 cents for
remaining 3kg
– Carton
– Equipment
– UOM
– Combinati
ons Configuration Elements:
-Conditional Parameters: Ship
unit specification & Equip
group
Example -Rate basis: Per ship unit
Price per Carton is $ 5 Rate cost -Combination of Equipment &
Total price of 5
Shipment distance travelled
cartons is $25
Or
consignment
or
Per UOM
range Configuration Elements
Rate Unit Break Profile: UOM type
weight , Miles Charge Amount: Flat rate (as required)
Charge Break comparator: per
etc. Shipment
Example
Shipment is charged a
flat rate of $250 for
maximum distance
travelled of 100 miles,
$350 for up to 200
miles etc.
up to 100 up to 200
mile miles
Rate 250 350
Configuration Elements:
-Master & Base Rates
-Accessorial – Fuel charge,
Extra service
-Charge Sequence
Configuration Elements:
-Rate basis – per shipment
-Accessorial- Time
sensitive/ FSC
-Special Services (covering
accessorial)
• Majority services are – Groupage, Part Loads and Full Truck loads
Equipment
DE HAM
Hanjin Hanjin
CN SHA
CMA- CGM DE BRV
CMA- CGM FI HEL
MSC MSC
BE ANR
• The world is divided into trades, i.e. Asia - North America, Asia - Latin America, Asia –
Europe
For the big trades, ocean rates are calculated with the following logic:
• A base rate (from fictive Base Port to fictive Base Port, e.g. Asian Base to European
Base)
• Origin Arbitrary (charge added for specific origin port)
• Destination Arbitrary (charge added for specific destination port)
• Adding those three elements together results in the total cost for per container type
(20’, 40’, 40’ HC etc.) from a specific origin to a specific destination.
OTM RESULTS
Configuration
Elements
Cost Category ID
• Define Accessorial at RO level which will apply for the country geography
• Define Accessorial at RO level which will always apply for that geography
Arbitrary Charges Based on Lanes
• Lane • If THC (Terminal handling Charges ) and other standard charges are common
to lanes
Weekday
Based rates
Applicable
for CEP or
3PL
If a shipment is picked up on Monday, Ratecost1 applies. Tuesday is Rate
cost2 etc.
Solution : Attach calendar in rate basis and ensure pickup dates are added
on order release if calendar activity is LOAD
• Rate Definition
• E.g. Association of Rate Services, Assessorial to RO Vs RR
Parcel- Kewill
glog.RatingEngine.Kewill.URL=
glog.RatingEngine.Kewill.Port=
glog.RatingEngine.Kewill.RefnumQual=
LTL-SMC3
glog.RatingEngine.Rateware.URL=
glog.RatingEngine.Rateware.Port=
glog.RatingEngine.Rateware.NewAPI
=true
Note: Rajasekhar Chennapragada had presented the paper due unforeseen urgencies by authors
mahindrasatyam.com
Safe Harbor
This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking
statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Mahindra Satyam undertakes no duty to
update any forward-looking statements.